Fear is an incredibly effective motivator when it comes to risk management—just look at how fast we’re moving to mitigate the Ebola exposure! I just wish we had the same sense of urgency about much bigger, but harder to manage threats.
I’m not suggesting that Ebola isn’t a major concern, particularly for those brave souls voluntarily going to the front lines in Africa to help treat the thousands who are either already infected or at far greater risk of catching the bug than are we, given the lack of health care resources in that part of the world.
However, as a long-time student of risk management, I am dismayed that we can mobilize so quickly to contain such a relatively manageable problem, yet appear to be paralyzed in the face of other significant, but perhaps less immediately scary threats to our lives, health, and financial well-being.
Viruses are frightening, but so are a number of other hazards out there that could do far more serious damage. The insurance industry is right in the middle of many of these challenges, for better or worse.
Take disaster mitigation. I’m writing this blog around the time of Hurricane Sandy’s second anniversary. The storm wiped out a vast number of homes and businesses, as well as a good deal of the region’s infrastructure, literally overnight. While there have been some preliminary steps taken from a loss control perspective to prevent similar events from crippling our communities, there’s generally been far more talk than action.
Plus few people directly exposed to flooding just can’t seem to bring themselves to buy insurance coverage for that risk, instead depending on luck or political pressure on the government to bail them out if they get hit with a major loss.
Looking at the bigger picture, we’re bogged down in a seemingly endless debate over whether there is enough scientific evidence to justify significant mitigation efforts minimizing the threat of climate change. I personally believe our dithering and dawdling is shortsighted, no matter which “side” of this debate you’re on.
Even if the vast majority of scientists warning about the risk of climate change and telling us what we should be doing about it are somehow blowing this issue out of proportion, doesn’t it still make sense to adopt cleaner, more sustainable energy sources and lower our dependence on fossil fuel? And if those who dispute the need to take action are wrong, we could be looking at a global catastrophe with far greater costs to the economy and humanity than the risk management investments we’re being asked to make.
Insurers in Europe have been among the leading voices on the need for sustainability efforts to combat climate change, and we’re seeing momentum begin to pick up here in the United States to get insurers more involved. Yet the odds of seeing more action than talk anytime soon appear to be slim.
Meanwhile, how about the looming economic threat posed by an aging U.S. population that generally is not saving or investing enough to sustain themselves comfortably in retirement? The specter of tens of millions of elderly Americans hard put to scrape by on minimal (if any) savings supplemented by a potentially shaky Social Security system is far more frightening to me than Ebola.
As with disaster mitigation and climate change, the insurance industry is right in the middle of this challenge. Life and annuities carriers are armed with the expertise, products, and services to help many people establish a reasonable plan to finance a relatively secure retirement, yet are having a hard time convincing many people to take the plunge and put a lifetime income plan in place.
Why do we panic at the mere mention of Ebola yet pretty much yawn and shrug about these other scary exposures?
For one, we’re generally procrastinators. People tend to ignore or put off anything that doesn’t feel like an imminent threat. Who knows when or even if we’ll ever get hit with another storm like Hurricane Sandy (or Andrew or Katrina)? Who can say for sure if climate change will make that big a difference anytime soon? And as for retirement savings, many people are more concerned about paying off student loans, home mortgages, or financing their kids’ education to think about how they’re going to make it through their so-called “golden” years.
President Franklin Roosevelt said that “the only thing we have to fear is fear itself,” but I’m not so sure that holds true today. The threat of Ebola gets attention and provokes decisive action because it scares the life out of us! What’s missing from discussions over these other, longer-term (and ultimately far more threatening) challenges I’ve raised is the fear factor!
Ideally, we shouldn’t have to be frightened into addressing such basic problems as the safety of our families, homes and businesses, as well as our long-term financial well-being. But in the real world, scaring people with the facts about what might happen if we fail to take steps now to neutralize big-time threats down the road could perhaps at least grab the public’s attention and prompt overdue action, before it’s too late to make a difference.
If that’s not scary, I don’t know what is.
Sam J. Friedman (firstname.lastname@example.org) is the research team leader at Deloitte’s Center for Financial Services in New York. These opinions are his own. For many years, he was the Editor in Chief of National Underwriter’s P&C edition. Follow Sam on Twitter at @SamOnInsurance, as well as on LinkedIn.